Financial Services

MACs no panacea for buyers looking to escape deals

24 Sep 2007

KKR wants out of Harman. Finish Line is spurning Genesco. Both claim material adverse changes get them off the hook. But MACs rarely work. If they fail, suitors have to pay break fees and could face shareholder lawsuits. Acquirers may have a lot to lose.

Weak dollar gives Fed’s confidence shot a chance

21 Sep 2007

The cut in overnight interest rates aims to avert a negative spiral from falling house price. It just might work. True, it won t save housing fast and risks pushing up inflation. But a weak dollar and booming US exports could keep the economy strong.

UK private equity is late to find its new champion

21 Sep 2007

Reuters spin doctor Simon Walker is a good choice to front the UK buyout industry trade body, even if his arrival is nine months too late. His job will be to help agree new rules on disclosure and, more trickily, defend its tax deal. An early election might let him off the hook.

Arab funds pile into London Stock Exchange

20 Sep 2007

But then Qatar snapped up 20% of the LSE and said it is looking at OMX. That puts the LSE back in play, with two deeppocketed suitors. Dubai moved first. It agreed to swap Nordic operator OMX if it wins it for Nasdaq s LSE stake and a 20% stake in the enlarged US group.

Sallie Mae should cut a deal

20 Sep 2007

The consortium buying the student lender wants to lower the price. That s no surprise, since it originally offered a nearly 50% premium. Sallie is sticking to its guns. But it doesn t have attractive alternatives. And its stock is still up 20%. It should cut a deal.

Nasdaq could have last laugh over LSE

19 Sep 2007

The US exchange may use its 31% stake in LSE as a bargaining chip to secure a deal with Borse Dubai over Nordic operator OMX. A threeway tieup between Nasdaq, OMX and Dubai would have sufficient firepower to make a bid the LSE finally couldn t refuse.

Next European bankruptcy wave will be bloody

19 Sep 2007

The LBO bubble has complicated balance sheets with exotic instruments while fragmenting the creditor body. Europe s bankruptcy laws aren t well attuned for producing negotiated settlements. The credit crunch will therefore produce bitter fights.

It’s almost time to buy Japan

19 Sep 2007

Thanks to credit worries, signs of a slowing economy and the prime minister s resignation, Japanese stocks are lagging their global peers. At current levels, valuations in Tokyo are starting to look attractive. But Japan isn't quite a screaming buy just yet.

UK guarantee to Northern Rock sets bad precedent

18 Sep 2007

The guarantee should stop the run on the stricken mortgage bank and a domino effect on other institutions. But foolish behaviour hasn t been adequately punished. In exchange for the guarantee, the state should have nationalised it.

Central bankers need to be performers

18 Sep 2007

As Ben Bernanke prepares for Tuesday s Fed meeting and the aftermath, he may wish he had more of his predecessor s stage flair. Mervyn King could have used more PR pizzazz too in dealing with Northern Rock. With policy tools limited, central bankers need charisma.

Inflation points down for pound and UK economy

18 Sep 2007

Inflation has dropped swiftly. The Bank of England may take advantage by cutting interest rates to help alleviate the credit crunch. That could undercut the pound, whose fall might deter capital flows into the UK, reduce growth and stir up some inflation again.

Greenspan profits from failure

17 Sep 2007

According to his memoirs, the former Fed chief was too busy being oracular to notice the US mortgage market bubble. That omission will cost the US economy dearly. But Greenspan now gets headlines and book sales for predicting house price falls.

Does bank ownership loom for Wall Street?

17 Sep 2007

The five standalone US brokerages have long shunned the idea. But the liquidity crunch may give them cause to reconsider the benefits. Banks enjoy flexible accounting, cheaper funding, and access to the Fed window. And longterm lending might be coming back into vogue, too.

Sarkozy is wrong to attack the ECB

17 Sep 2007

The French president is once again putting the blame for his country s poor economic performance on the ECB and European authorities. But he should concentrate on what he could do to reform the economy at home. The euro isn t responsible for France s lacklustre growth. The French president is once again putting the blame for his country s poor economic performance on the European Central Bank. But he should concentrate on what he could do to reform the economy at home. The euro isn t responsible for France s lacklustre growth.

Buyout boffins may start resembling venture capitalists

14 Sep 2007

That is, if the credit crunch limits the size of LBOs from now on. Buyout shops reap more revenue per partner because they do bigger deals. That means bigger funds and more fees. Venture funds do smaller deals. But buyout barons may find it increasingly hard to hunt behemoths.

Blackstone sees challenges. But BoA is bullish.

14 Sep 2007

Blackstone won t be doing mega deals anytime soon, says a BoA analyst who met with Tony James. It is looking at PIPEs and minority stakes. That can only be a bad sign for the newly public private equity firm. Bizarrely, the sell side analyst doesn t think so.

Goldman’s hedge fund problems look surmountable

13 Sep 2007

Goldman Sachs asset management unit is reeling from losses at its flagship hedge fund, Global Alpha. It doesn t look good. But apart from embarrassment over its predicament, Alpha s woes don t seem to be an immediate threat to the company s business.

Cerberus’ ResCap problems don’t stop at liquidity

13 Sep 2007

Funding fears aroused rumours of bankruptcy for the mortgage lender. A new loan from Citigroup should quell that, for now at least. But owner Cerberus has a longerterm dilemma: without subprime, it ll be much harder for the former GMAC jewel to turn a decent profit.

Strategic buyers still not pouncing

12 Sep 2007

Carlyle recently pulled the sale of Insight Communications because bids came in short of the $3bn it expected to reap. Part of the problem was the lack of buyout money. But the fact that strategic buyers walked shows they may be awaiting further price falls.

LSE might not be safe in Italian-Qatari deal

11 Sep 2007

Several Italian banking foundations may join forces with Qatar s sovereign wealth fund to buy Nasdaq s 31% stake in its London rival. That would be a neat exit for Nasdaq. It may also be the best option for the LSE. Yet the new shareholders may have their own agendas.